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A Politician’s Public Service

Presidential aspirant Rep. Dick Gephardt, D-Mo., unwittingly performed a public service in his address to the Teamsters Local 238 in Cedar Rapids, Iowa, last month. He revealed the true agenda behind so much of the support for minimum wages. He pledged that if he became president he’d press the World Trade Organization to establish an international minimum wage — one that he says is high enough so that American workers are not competing with slave, sweat-shop and child labor around the world.

History has seen many calls for minimum wages for the same reason — to eliminate competition with workers who’d work for less. During South Africa’s apartheid era, white unionists argued “in absence of statutory minimum wages, employers found it profitable to supplant highly trained (and usually highly paid) Europeans by less efficient but cheaper non-whites.”

One South African union leader said, “There is no job reservation left in the building industry, and in the circumstances I support the rate for the job (minimum wages) as the second best way of protecting our white artisans.”

The South African Nursing Association condemned low wages received by black nurses as unfair. Some nurses said they wouldn’t accept wage increases until the wages of black nurses were raised. These are but several of numerous examples of calls for minimum wages cited in my 1989 book, “South Africa’s War Against Capitalism.” You can bet the farm that these calls for minimum wages for blacks didn’t represent white compassion for the welfare of blacks. Minimum wages are simply one of the most effective tools in the arsenals of racists everywhere.

I’m not charging Gephardt with racism. He claims he just wants to end policies that have left millions of Americans suffering economically and workers overseas denied opportunity for a better standard of living. That’s his stated intention, but when we analyze the effects of policy, we can almost always ignore policy intentions.

One effect of minimum wages is that of discrimination against the employment of less-preferred workers. A worker might be less preferred in the eyes of a particular employer in a number of ways. He might be low-skilled, less intelligent, or a different nationality or race. Put yourself in the place of an employer, and ask: If the law requires me to pay, say, $9 an hour, no matter whom I hire, does it pay me to hire someone who has skills enabling him to produce only $5 worth of value per hour? Most people would view hiring such a worker as a losing economic proposition.

Are low-skilled workers made better or worse off as a result of the $9 minimum wage? It’s almost a no-brainer to conclude that being hired at $5 an hour puts more food on the table than not being hired at $9. What’s more, minimum wages reduce training opportunities. Most of us gain skills through on-the-job-training. Minimum wage laws deny that opportunity.

A more insidious effect of minimum wages, as racists everywhere know, is that it lowers discrimination costs. Say a white and a black were equally productive and an employer prefers white workers to black workers. Since he has to pay $9 an hour no matter whom he hires, the cost of discriminating against the black worker is zero. But if it were legal for the black worker to offer a lower price, there’d be a cost to discrimination. That’s precisely why South African whites demanded that blacks be paid the minimum wages — they wanted to cheapen discrimination costs.

Gephardt’s speech is to be commended for its public service, namely that of revealing the underlying motive for minimum wages: making sure that one class of workers doesn’t have to compete with another.